Fiscal Performance in Monetary Unions: How Much Austerity Should Be Allowed?

Abstract

The effectiveness of fiscal policy becomes particularly relevant in the case of the member countries of a monetary union facing a sovereign debt crisis. In that environment, fiscal policy is constrained by the need to carry out fiscal consolidation and reduce debt levels. For that reason and with the purpose of anchoring fiscal discipline, the adoption of fiscal rules has become a central issue. In this paper we will analyse the management of fiscal policies in monetary unions, when the central bank and the fiscal authorities follow policy rules. The results are related to the conservativeness of the central bank, the degree of austerity of the fiscal authorities and the initial level of public debt.

Key words: Policy rules, Fiscal policy, Monetary unions.
JEL: E63, H30.

Efektivnost fiskalne politike postaje posebno relevantna u slučaju kada se zemlja članica monetarne unije suočava sa krizom javnog duga. U takvom okruženju, fiskalna politika je ograničena potrebom da sprovede fiskalnu konsolidaciju i smanji javni dug. Iz tog razloga i sa ciljem zatezanja fiskalne discipline, usvajanje fiskalnih pravila postaje centralno pitanje. U ovom radu analiziramo upravljanje fiskalnim politikama u monetarnim unijama, kada centralna banka i fiskalne vlasti prate fiskalna pravila. Rezultati se odnose na konzervativnost centralne banke, nivo štednje fiskalnih vlasti i inicijalni nivo javnog duga.

Ključne reči: Fiskalna pravila, fiskalna politika, monetarne unije.